South Africa’s economy has beaten that of Nigeria to become the continent’s largest in dollar terms. The ‘rainbow nation’ regains a title it lost more than two years to Africa’s most populous nation.
The new estimates according to Bloomberg, were as a result of the national currency performance against the United States dollar. The Nigerian naira has been dropping whiles the South African rand keeps making gains against the dollar.
Bloomberg quotes the size of South Africa’s economy being $301 billion at the rand’s current exchange rate, while Nigeria’s being $296 billion, based on gross domestic product (GDP) at the end of 2015 published by the International Monetary Fund (IMF).
Although Nigeria is unlikely to be unseated as Africa’s largest economy in the long run, the momentum that took it there in the first place is now long gone.
The growth of the South African economy was premised on the rand having gained over 16% against the dollar since the start of 2016. In the other case, Nigeria’s naira lost more than a third of its value after the central bank bank removed a currency peg in June.
“More than the growth outlook, in the short term the ranking of these economies is likely to be determined by exchange rate movements,” Alan Cameron, an economist at Exotix Partners LLP, is quoted by Bloomberg to have said.
Although Nigeria is unlikely to be unseated as Africa’s largest economy in the long run, “the momentum that took it there in the first place is now long gone,” he added.
Both countries faced the risk of falling into recession after contracting in the first quarter of the year. The Nigerian and South African economies shrank by 0.4 and 0.2 percent respectively in the three months through March from a year earlier.
In the case of Nigeria, it was due to low oil prices and output plus shortage of foreign currency. That curbed imports, including fuel. Whiles in South Africa, the GDP contracted from a year earlier as farming and mining output declined.
Nigeria was assessed as the continent’s largest economy in April 2014 when authorities in the West African nation overhauled their GDP data for the first time in two decades.